Blue Origin rocket engine
LOS ANGELES — A California state appeals panel has agreed the Jeff Bezos-funded space technology company, Blue Origin, can't use arbitration to sidestep a former senior program manager's wrongful termination and harassment suit.
According to court documents, Craig Stoker worked for Woodland Hills-based Blue Origin from 2020 to October 2022 as a senior program management director. After his termination, which he said followed his filing of several corporate safety complaints, he filed a November 2023 lawsuit in Los Angeles County Superior Court alleging a variety of employee rights issues, including a Fair Employment and Housing Act sexual harassment claim.
When Blue Origin sought to move the dispute to arbitration, citing contract language, Stoker resisted by pointing to the 2021 Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act. Los Angeles County Superior Court Judge Cherol Nellon agreed, prompting Blue Origin’s challenge before the California Second District Appellate Court.
Justice Lee Smalley Edmon wrote the panel’s opinion, filed April 24; Justices Rashida Adams and Mark Hanasono concurred.
Edmon said Blue Origin’s motion to compel acknowledged the legal reality that sexual harassment claims are exempt from mandatory arbitration under its own contract terms, but instead argued that aspect of his claim was too “bare” to meet the legal bar for harassment. The remainder of the complaint involved allegations of retaliation, breach of contract, negligent hiring, wrongful termination and intentional infliction of emotional distress.
While insisting his gender harassment dispute was viable, Stoker also argued the entire arbitration “was substantively unconscionable because it required Stoker to arbitrate all claims (not merely those related to his employment) against Blue Origin and its parents, subsidiaries, affiliates, and current and former employees” Edmon wrote. He added that it “excluded from arbitration those claims Blue Origin was most likely to bring against Stoker, while including those claims Stoker was most likely to bring against Blue Origin; waived Stoker’s right to bring a claim under the Private Attorneys General Act; and contained an invalid choice-of-law provision, forum selection clause, and attorney fee provision.”
When Judge Nellon rejected the motion to compel, she noted Stoker’s complaint alleged colleagues ignored his safety concerns specifically because of his gender and a corporate belief he should “man up.” Nellon did not consider whether the arbitration agreement was conscionable. But the appellate court did the opposite, finding the “agreement was procedurally and substantively unconscionable” while not considering if the EFAA applied.
The panel noted California Supreme Court guidance regarding “contracts of adhesion,” or those that give one party only the option to agree or reject. Stoker said he had reservations about the employment agreement during his onboarding in August 2020 but claimed a recruiter didn’t offer to answer questions, implied nothing was negotiable and said the contract “contained ‘standard terms,’ that ‘everyone has to sign to these terms,’ and ‘everybody always signs to these terms.’ ”
The panel noted Blue Origin didn’t present any evidence Stoker did or could’ve negotiated the terms. That rendered it adhesive, Edmon wrote, prompting the panel to examine contract terms to ascertain whether the company overreached its influence.
“The arbitration agreement is overbroad,” Edmon wrote, noting it applies not just to the employment relationship but “any claim that might arise at any time between Stoker and Blue Origin or its parent, subsidiaries, affiliates, successors or assigns, or employees of any of these entities,” such as an automobile collision with another employee years into the future, or property damage linked to Blue Origin rocket debris.
Blue Origin argued the contract only addressed employment-related claims, pointing to a clause reading “including, without limitation, claims arising out of or relating to my employment,” but the panel said the expansive phrase “any and all claims” is of primary concern. It further agreed the agreement generally applies to issue an employee is likely to raise while not similarly limiting potential company claims.
The panel further said the agreement forced employees to waive the right to a jury trial on any claim and noted such clauses “are contrary to California public policy.” It also deprives workers of the right to initialize class actions, which the panel said is acceptable under federal law but can’t square with the state’s Private Attorney General Act, which doesn’t allow pre-dispute categorical waivers.
Given the agreement “contains a high degree of substantive unconscionability,” Edmon wrote, the panel considered whether it should reject the entire contract, sever the relevant clauses or limit the application of those clauses to avoid unconscionable results.
While the panel said it could arguably sever just the clauses about jury trials and representative claims, the initial section that “governs the kinds of claims subject to arbitration, is far more problematic,” Edmon wrote. “This section’s overbreadth could be corrected only by adding language limiting the provisions’ reach to claims arising out of Stoker’s employment — and as we have said, courts have no authority under governing law to cure unconscionable contracts through ‘reformation and augmentation.’ ”
The panel likewise said it couldn’t eliminate the limitations on the type of claim Stoker could bring and reasoned that even if partial severance were possible, it wouldn’t be appropriate as enforcing what remains wouldn’t be in the broader interests of justice. Edmon concluded by saying that logic undercuts the agreement’s own clause allowing for severance.
Blue Origin is represented by Davis Wright Tremaine.
Stoker is represented by Shegerian & Associates.
The Civil Justice Association of California filed a support brief for Blue Origin through Gutierrez, Preciade & House.
